Correlation Between ESS Tech and Fluence Energy

Can any of the company-specific risk be diversified away by investing in both ESS Tech and Fluence Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ESS Tech and Fluence Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESS Tech and Fluence Energy, you can compare the effects of market volatilities on ESS Tech and Fluence Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ESS Tech with a short position of Fluence Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESS Tech and Fluence Energy.

Diversification Opportunities for ESS Tech and Fluence Energy

0.04

Correlation Coefficient

ESS Tech  Fluence Energy

Significant diversification

The 3 months correlation between ESS and Fluence is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech and Fluence Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluence Energy and ESS Tech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ESS Tech are associated (or correlated) with Fluence Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluence Energy has no effect on the direction of ESS Tech i.e., ESS Tech and Fluence Energy go up and down completely randomly.

Pair Corralation between ESS Tech and Fluence Energy

Considering the 90-day investment horizon ESS Tech is expected to under-perform the Fluence Energy. In addition to that, ESS Tech is 1.54 times more volatile than Fluence Energy. It trades about -0.06 of its total potential returns per unit of risk. Fluence Energy is currently generating about -0.07 per unit of volatility. If you would invest  2,119  in Fluence Energy on August 31, 2024 and sell it today you would lose (282.00) from holding Fluence Energy or give up 13.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ESS Tech  vs.  Fluence Energy

ESS Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESS Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ESS Tech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Fluence Energy

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fluence Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fluence Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESS Tech and Fluence Energy

The main advantage of trading using opposite ESS Tech and Fluence Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESS Tech position performs unexpectedly, Fluence Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fluence Energy will offset losses from the drop in Fluence Energy's long position.

The idea behind ESS Tech and Fluence Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.